Moldova is Celebrating its Independence Day

Today, 27th of August, Moldova is celebrating 15 years of independence. In 1991, the Moldovan government, supported by the majority of Moldovan citizens, proclaimed its independence from the Soviet Union. It is an important event, of which the scale and scope of today’s celebration is proof. The President of Moldova, together with other high-level officials, are inaugurating new streets, cutting ribbons for new constructions and sites, and making public speeches. On this day, it feels very good to be a Moldovan citizen in a free, independent and peaceful country. Long live Moldova!

Moldova's Future Remains Uncertain

Listening to various opinions about the same event/ situation might bring you closer to the truth. The report published by the International Crisis Group (ICG) "Moldova's Uncertain Future" http://www.crisisgroup.org/home/index.cfm?id=4340&f=1 contains an interesting analysis of recent initiatives to approach several Transnistrian-related problems. One is the EU Border Assistance Mission (EUBAM) launched in late 2005 to help curb smuggling along the Transnistrian segment of the Moldova-Ukraine frontier. Another one is Kiev’s implementation of a landmark customs regime to assist Moldova in regulating Transnistrian exports to reduce the ability of Transnistrian businesses to operate without Moldovan oversight.

The report finds that these measures have not forced Transnistria to make diplomatic concessions, as anticipated. ICG thinks that now "the best chance for moving toward a sustainable settlement is to convince the Transdniestrian business community that cooperating with Moldova is in its own interests. There is evidence that some business leaders are growing frustrated with Smirnov and may be willing to work with Chisinau."

Is Chisinau Ready for the Capital Market?

The development needs of Chisinau City are enormous. According to some estimates, total capital investment needs amount to about $3 billion for the next 13 years. This is a huge amount for the capital city of one of the poorest countries in Europe where the average hourly wage is 70 times lower than in Denmark. Some people prefer to label this estimate as “impossible” or “unreal,” and accept the status-quo. I prefer to approach this figure as a price tag for a better life in Chisinau. Then, the question is: can we afford a better life, and if yes, how?

This happens to be the central issue of a study I’m currently doing for Chisinau City. How can the City finance its development needs? According to the principles of fiscal theory, capital investments with a life cycle that spans across several generations of users should be financed equitably by taxpayers of each generation. It is not equitable for the current taxpayers to pay fully for the schools, roads, bridges that will be also used by future generations. This is the main idea behind municipal bonds: first, the City issues bonds to collect debt to build capital public goods, and then it repays the interest and principle of this debt over a longer period of time. As a result, users from subsequent generations share the cost of the public good from which they benefit.

Is Chisinau ready for this new practice? Not really. It has never issued municipal bonds. It lacks institutional capacity in this area. The current management of municipal finance (mainly budgetary revenues and expenditures) has many shortcomings. Fiscal policies are developed and lobbied at the national level. Nevertheless, Chisinau must start building these capacities and getting ready for entering the capital market. Hopes of becoming a modern European city cannot be supported by the revenues of the present generation alone.

Moldovan Wines: A Future Strategy

Moldovan winemakers are attempting to conquer the European market, particularly after Russia’s ban on import of Moldovan wines. Even if Russia would allow Moldovan wines back on its market, their image has already been seriously damaged. As always, every problem is an opportunity. Moldovan wines need to be re-invented. For instance, an improved image and increase competitive capacity might be outcomes of one consolidated brand. Instead of having hundreds brands (some of which are pretty stupid, e.g. A Nun’s Sin or A Monk’s Sinful Dream) our wines could enter new markets under one brand such as Moldovan Wines, suggests Denis Stirbu from KSB Partners.

This idea makes sense even more in the context of the ongoing reform in European winemaking. Because the wines of the New World (the Americas, Australia) are becoming more popular, presumably due to their simple and clear labels and brands, e.g. Merlot California, the European winemakers intend to do the same. Consequently, in 2007 French wines will reach their old and new customers under one brand, Sud de France.

When I lived in New York City, I could not find too many Moldovan wines in local wine stores. Yet, although I did find a couple of bottles, I did not buy them because I wasn’t really sure about their contents. Instead, I used to buy the Australian Yellow Tail Merlot or Cabernet. However, of all European wines, I prefer Italian. I hope one day I can add “and Moldovan.”

Moldova vs. Russia: Next Round

The biggest and most important event in terms of Moldova's foreign policy is the recent official meeting of the Moldovan President Voronin with the Russian President Putin that took place in Moscow. Its importance derives from the fact that the relations between these two countries have been tense for the last three years, since Moldova's refusal to sign the Kozak Memorandum prepared by Russia, and intended as a solution to the Transnistrian conflict. It should not be suprising that the Kozak Memorandum, as any other agreement prepared unilaterally by Russia for Moldova, given the present distribution of power, completely neglected Moldova's territorial integrity aspirations.

What this official meeting, first in the last three years, will bring about is still unclear. There are high hopes related to improved political and commercial relations with Russia. This meeting marks the beginning of a new phase in the political dialogue, and will most likely contribute to stabilization of Moldo-Russian relations. There is no other way. However, again and as always, it's up to the Moldovan government to act and negotiate strategically so as to obtain as much as it is realistically possible from this renewed relationship with Russia. The underlying disequilibrium of political and economic power between Moldova and Russia will never change, thus the best Moldova can do is to learn to take advantage of opportunities, be diplomatically nimble and smart, and continuously seek support from larger powers that have the ability to negotiate with Russia on more equal terms.

Good News for Local Governments

The local government reform in Moldova has been heavily criticized by Council of Europe institutions such as the Parliamentary Assembly and the Congress of Local and Regional Authorities. The major compaint is that after 15 years of reform, the local governments still rely heavily on transfers from upper tiers of government which limits local autonomy significantly. Oftentimes, local revenues raised within the boundaries of the locality are insufficient to cover even the administrative expenses of the mayor's office.

The key problem rests with the legislation. Finally, the legislation is soon to be improved, and the major shortcomings will be eliminated. The Parliament has already adopted the draft new law on local public finances in the first reading. I have read the new piece of legislation, and, in my opinion, it contains important provisions that can lead to an increased financial autonomy of local governments.

This is to be continued in the next Parliamentary session which will take place in October.

New Foreign Policy for Moldova

I ran across a very interesting article about Moldovan foreign policy, particularly concerning the relationship with Russia. The author, Igor Botan, executive director of Association for Participatory Democracy “ADEPT”, attempts to explain why the Moldovan Parliament postponed adoption of the recently reviewed national security and foreign policies, in the context of Russia’s recent political and economic pressures on Moldova. I’d recommend reading the entire article (http://www.e-democracy.md/comments/political/200607312/), but I will briefly present the major ideas.

The Moldovan legislature chose to wait and see “how things go.” This, however, does not translate into an abandonment of its commitments vis-à-vis EU. Neither does the Moldovan President’s attendance of the informal CIS summit that took place in Moscow on 21-22 July. According to Botan, this politically-significant behavior has more to do with keeping a specific segment of the Communist Party’s electorate “happy” concerning Moldovan relationship with Russia. In reality, though, this relationship has been seriously and irreparably damaged. It has been proved that "friendship" with Russia implies very high costs for small countries like Moldova. This problem opens a set of opportunities for Moldova. They should determine its foreign policy according to the following scenario. In the short run, the priority should be successful implementation of the EU-Moldova Action Plan. In the medium run, Moldova should strive to join Central European Free Trade Agreement (CEFTA), and in the long term, the priority should be joining EU together with the West Balkan countries.

To me, this sounds like a great plan! What do you think?